Current Account Deficit Narrows to 0.9 per cent of GDP in Q2

New Delhi, December 31: India’s current account deficit (CAD) narrowed to 0.9 per cent of GDP in the July-September quarter (second quarter) of 2019-20, Reserve Bank of India (RBI) data showed here on Tuesday.

The apex bank stated, CAD at $6.3 billion (0.9 per cent of GDP) in Q2 of 2019-20 narrowed from $19 billion (2.9 per cent of GDP) in Q2 of 2018-19 and $14.2 billion (2 per cent of GDP) in the preceding quarter.

RBI said: “The contraction in the CAD was primarily on account of a lower trade deficit at $38.1 billion as compared with $50 billion a year ago.”

Net services receipts during the quarter increased by 0.9 per cent on a y-o-y basis, on the back of a rise in net earnings from computer, travel and financial services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $21.9 billion, increasing by 5.2 per cent from their level a year ago.

During the quarter, in the financial account, net foreign direct investment was $7.4 billion, almost same level as in Q2 of 2018-19.

Foreign portfolio investment recorded net inflow of $2.5 billion – as against an outflow of $1.6 billion in Q2 of 2018-19 – on account of net purchases in the debt market.

In Q2 net inflow on account of external commercial borrowings to India was $3.2 billion as compared with $2 billion in Q2 of 2018-19.

RBI data showed there was an accretion of $5.1 billion to the foreign exchange reserves (on Balance of Payment basis) as against a depletion of $1.9 billion in Q2 of 2018-19.

The CAD narrowed to 1.5 per cent of GDP in H1 of 2019-20 from 2.6 per cent in H1 of 2018-19 on the back of a reduction in the trade deficit which shrank to $84.3 billion in H1 of 2019-20 from $95.8 billion in H1 of 2018-19.